The much-lauded South Africa’s transition from apartheid to a democratic state was a momentous occasion that held promise for a more equitable and just society. However, the harsh reality is that the untameable neoliberal dispensation, under the equally uncontrollable and extremely powerful financial services industry, has thrived at the expense of the formerly oppressed black population.
The financial services industry and banks, in particular, have trampled on people’s rights and shown no desire to see a truly liberated and prosperous South Africa. This opinion piece aims to shed light on the damning effects of neoliberalism and the role of the financial sector in perpetuating inequality and exploitation.
American historian Michael Parenti’s analysis of capitalism provides a stark revelation: “The wealth of the few rests in the poverty of the many.” This dynamic relationship between prosperity and poverty is evident in South Africa, where the rich have amassed their wealth through the mass exploitation of people.
The financial sector stands in the way of South Africa finding a good development model for itself. The apartheid model has not died but continues to flourish through the uncontrollable financial sector. The apartheid model had Bantustans at the centre as a source of labour that served as a propeller for its economic goals.
Surpluses drawn from mining proceeds were used to industrialise white South Africa but a model for the black side of South Africa was ominously absent, and this remains a case to this day. The Randlords, akin to slave masters and upper classes in other countries, relied on poorly paid workers, indebted individuals and taxpayers to generate their wealth.
The current dispensation’s failure to challenge the neoliberal system allowed this exploitative relationship to persist.Unfortunately, cheap labour (sometimes with high educational qualifications) is still acquired by force and immigration, and this means that scores of people are desperate for places to stay. And the banks are standing on the side of the road selling mortgages that people are compelled to buy to have a decent living.
The success of free-market capitalism relies on severalfactors, including misinformation and ideas that perpetuate injustices. One of the most important factors is the belief that the free market is a fair and efficient system. This belief is often promoted by those who benefit from the system, such as the wealthy and powerful.
Neoliberal proponents rely on self-legitimising myths such as equal opportunity, self-reliance and fair play to justify their actions. However, as Parenti argues, modern capitalists avoid talking truthfully about themselves. These myths serve the interests of the capitalist elite and prevent a critical examination of the structural inequalities within the system.
Furthermore, these masters of deceit also argue that the free market rewards hard work and innovation, and that it is the best way to create wealth and prosperity for everyone. But cry foul when the likes of China and Saudi Arabia also use their deep pockets to snap up assets and undermine their logics. Hypocritically, they accuse Saudi Arabia of ‘sportswashing’ its human rights record and China of manipulating the rules of the game.
The Davos Club, representing the powerful capitalist class, perpetuates these myths while disregarding the suffering of the majority. In South Africa, for example, the financial services sector holds an uncontrollable grip on the economy.Late economist Thandika Mkandawire once argued that the country’s financial sector is way too powerful, and it will be detrimental to the economy if other tools are not deployed to avert recessions in the future.
The reality we live with today is that the state has no leverage over the capital, which means it has the latitude to do as it pleases not only within the South African borders but also in the neighbouring countries as well. This sector stands as an impediment to the country finding a sustainable development model that prioritises the rights and livelihoods of people. Many of its practices or policies contribute to the erosion of savings and a debt-heavy life for people.
Relying on the apartheid economic model, which is extractive in nature, the financial services and banks propagate myths and take advantage of people’s vulnerabilities which unavoidably trace their origins from their not-so-distant past. Illiteracy and homelessness cannot be divorced from apartheid policies like segregated spatial planning and Bantu education.
The champions of neoliberal thought spread false ideas to ensure that the financial sector flourishes under the conditions of desperation. In this regard, people are sold a myth that it is better to buy such things as houses and cars and are mislabelled as “assets”.
In ‘Rich Dad Poor Dad’, Robert Kiyosaki argues that “an asset is something that generates income or puts money into your pocket, while a liability is something that incurs expenses or takes money out of your pocket”.
Owning a house, you live in, is not necessarily an asset in a classical sense and must be considered differently from an investment or income-generating asset. While it may have value, a primary residence could be seen as a liability because it requires ongoing expenses such as mortgage payments, property taxes, maintenance and utilities. One wonders why there is a belief that people should “invest” in houses instead of renting them.
Well, there is a good reason for this misinformation banks must gain from the misfortunes of an obliterated society that has mothers and fathers abandoning their children to travel to work located many miles away. Also, people have to move from their places of origin (the periphery) to find education and economic opportunities in the former white-only urban centres (the core).
Therefore, the conditions are ripe for banks to maximise their gains. They are complicit in this unequal system and sell mortgages to desperate individuals who are forced to buy property to secure a decent living. The financial model is extractive in nature, with the banks benefitting multiple times from the same property, while the homeowner shoulders the greatest risk. Individuals are on their own when interest rates rise or when their employment status changes.
With the help of banks via predatory lending practices, Individuals commit their hard-earned salaries to acquire useless assets like houses, credit cards and less desirable items such as expensive cars, booze, or designer goods. Economists joyfully call this demand a sign that the economy is healthy. This is what unnecessarily fuels inflationary pressures that, in turn, necessitate incessant interest rate hikes.
The trouble with this arrangement is that the poor and the marginalised have to bear the brunt of what American economist Thorstein Veblen termed “conspicuous consumption”. As he put it, the free-market system rewards those who already have wealth and power. It is also rigged in favour of the rich and designed to keep the poor in their place.
The concentration of wealth and power in the financial services sector contributes to persistent income inequality in the country. Marginalised communities, particularly black South Africans, face barriers such as inadequate financial literacy, financial exclusion and a heavy burden resulting from the forever surging interest rates.
The South African financial system perpetuates a cycle of debt and dependency as well as entrenches the economic chains that bind the majority. As elsewhere in the world, there is a need for alternative economic approaches that prioritise social equity and economic justice.
The financial system needs to be restructured in order to get millions out of poverty because public policy cannot do it alone. At the moment macroeconomic policy and social welfare policies are moving in opposite directions. They can only be aligned when the financial services industry is brought under control.
Si ya yi banga le economy!
The views expressed in this article are the author’s and they do not necessarily represent the policy of Jambo Africa Online.